Imperial Tobacco NZ lifts Australian sales

April 15 (BusinessDesk) – Imperial Tobacco New
Zealand, the nation’s second largest cigarette company,
boosted annual sales after expanding its Wellington factory
to supply the Australian market and taking on a 10 percent
excise tax hike.

Sales at the local arm of Imperial
Tobacco, whose brands include Peter Jackson and Drum loose
tobacco, rose 9.6 percent to $432 million in the year ended
Sept. 30, according to the company’s annual
report.Profit fell 12 percent to $19.8
million.

Imperial has spent $50 million to increase
capacity at its only New Zealand plant, which exports 80
percent of production to Australia. The company exported
$75.6 million worth of cigarettes and tobacco, and paid $286
million worth of duty to the government last year. Sales to
Australia helped offset weaker turnover in New Zealand, it
said.

Imperial’s smaller rival,
third-ranked Philip Morris (New Zealand), had a 13 percent
sales gain to $83 million in calendar 2013. The annual
report for the maker of Marlboro brand showed profit rose 20
percent to $1.2 million last year, after a 30 percent drop
to $993,000 in 2012.

Early this month parent Philip
Morris International said it would close its manufacturing
plant in Australia, saying government regulations that
reduce the ‘fire risk’ of cigarettes, required by
Australian legislation had hurt exports. In 2013 the New
Zealand arm of the company purchased $5.1 million worth of
product from its Australian counterpart.

Philip Morris
Asia is challenging Australia’s plain packaging
legislation in the international Permanent Court of
Arbitration, claiming it breaches a Hong Kong-Australia
trade agreement, after having lost a bid to sue in the
Australian High Court in 2012.

In New Zealand, the
government has been increasing the tobacco excise by 10
percent each year since 2012, lifting the price consumers
must pay as part of a policy to make New Zealand smoke-free
by 2025. The increases are expected to lift the average
price of a pack of 20 cigarettes to more than $20 by
2016.

New Zealand is looking to follow Australia in
introducing plain packaging in a bid to reduce brand
recognition and shrink the cigarette market. Australia has
introduced non-identifiable tobacco products but is being
sued by tobacco producing countries at the World Trade
Organisation which say the new regulations are intellectual
property infringement.

Tobacco companies have been
vigorously opposed to the plain packaging movement,
questioning the legality and effectiveness of removing the
last mode of advertisement for their brands and arguing it
has led to an increase in black market tobacco.

British American Tobacco Holdings (New Zealand), which
sells the Winfield and Benson & Hedges brands and is the
nation’s largest cigarette business, hasn’t yet
published its 2013 annual report. In 2012, sales rose 8.3
percent to $1.1 billion while it recorded a 5 percent drop
in profit after recognising a 40 percent increase in tax
expenses.

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

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